Best & Worst States to Get an SBA Loan

Based on data obtained directly from the Small Business Administration (SBA) for loans approved from 2010 to 2018, we have ranked the best states for SBA loans and the worst states for SBA loans. We evaluated the best and worst states in terms of access to SBA loans, average SBA loan amount, and repayment rate.

How We Evaluated the Best States for SBA Loans vs Worst States for SBA Loans

To determine the best states for SBA loans and the worst states for SBA loans, we analyzed data provided by the SBA and the United States Census. We ranked each state based on access to SBA financing, SBA loan repayment rate, and average SBA loan amount. We then compared where each state fell within these rankings to determine the best state for SBA loans and the worst state for SBA loans.

The indicators we used to determine the best and worst states for SBA loans were:

• Access to SBA financing: Comparing the number of small businesses in the state to the number of small businesses that received SBA funding between 2010 and 2018.
• SBA loan repayment rate: Of the number of loans that were closed out between 2010 and 2018, how many were paid in full by the borrower versus being charged off or canceled by the SBA for failure to pay.
• Average SBA loan amount: We calculated the average SBA loan amount given to businesses in each state and ranked them largest to smallest.
• Comparison of where each state fell within each list: The overall best and worst states were determined based on appearance and ranking on each list.

SBA loan interest rates are some of the most affordable rates in the industry, and businesses nationwide can apply for SBA loans. However, the ease with which you can obtain SBA financing may depend on the state in which your business is located.

We ranked all of the states based on each of these factors individually, to determine the easiest and hardest states to get an SBA loan, the states with the best and worst repayment rate, and the states with the highest and lowest average SBA loan amount. Comparing where each state ranked for each of these factors, we determined the overall best and worst state in which to get an SBA loan.

Best States for SBA Loans by Number Issued

The best states for SBA loans is based on the percentage of eligible businesses in each state receiving SBA loans. The number of eligible small businesses was determined based on SUSB data from the U.S. Census. The percentage of businesses receiving SBA loans was calculated by dividing the number of SBA loans issued from 2010 to 2018 by the number of small businesses in the state.

Best States for SBA Loans by Number Issued at a Glance

Source: SBA Loan Data 2010-2018

States (Including Washington, D.C.) Ranked By Access to and Amount of SBA Funding

Best States for SBA Loans by Repayment Rate

The best states for SBA loans based on repayment rate was based on the overall percentage of loans that were repaid in full and on time. The repayment rate for SBA loans in each state was determined by dividing the number of loans that were paid in full between 2010 and 2018 by the total number of loans that were no longer in repayment status, such as paid in full, charged off, or canceled.

Best States for SBA Loans by Repayment Rate at a Glance

States Ranked by SBA Loan Repayment Rate

Lists of the Best States for SBA Loans & Worst States for SBA Loans

Based on our evaluation standards, we ranked each state by the level of access to SBA loan funding, the repayment rate of loans made in that state, and the average SBA loan amount. Comparing lists of the 10 best states for SBA loans and the 10 worst states for SBA loans for each category, we determined the best and worst overall states in which to get an SBA loan.

Overall Best State for SBA Loans: New Hampshire

It was difficult for us to rank the best state to get and repay SBA loans because there was no state that wowed us across all three measures: access to SBA loans, average loan size, and repayment rate. However, New Hampshire ranked highly on both access to SBA loans as well as overall repayment rate.

In New Hampshire, 15.65% of small businesses got SBA loans between 2010 and 2018. This was the second highest out of all states. While 15.65% may seem like a small number, SBA loans are very difficult to qualify for, so only a very small fraction of businesses succeed.

For New Hampshire businesses that got SBA loans, the average loan size was $107,927. This is a decent loan size, but other states such as George, South Carolina, and Arkansas were the best in terms of loan size.

The SBA loan repayment rate in New Hampshire was excellent. More than 75% of New Hampshire small businesses paid back their SBA loans on time, making this the third highest SBA repayment rate in the nation.

Overall Worst State for SBA Loans: West Virginia

Unfortunately, West Virginia didn’t fare as well in our rankings. West Virginia was the only state that appeared on all three of our worst states lists. Only 5.23% of eligible small businesses in West Virginia were able to obtain SBA loans between 2010 and 2018, making West Virginia the third worst state for accessing an SBA loan.

West Virginia’s repayment rate was also poor, with nearly 35% of West Virginia businesses that received an SBA loan defaulting on their debt. Additionally, West Virginia was also on the list of lowest average SBA loan amounts, with the average SBA loan for the state being $195,686.

Easiest States to Get an SBA Loan

With more than 16% of small businesses in the state receiving SBA loans, Utah is the easiest state in which to receive an SBA loan. New Hampshire and Ohio were ranked second and third with more than 15.5% of small businesses in those states receiving SBA loans. Even Minnesota, who ranked number 10 on our list, had just more than 12% of small businesses receive SBA loans.

The 10 best states for SBA loans based on percent approved are:

1. Utah
2. New Hampshire
3. Ohio
4. Rhode Island
5. Massachusetts
6. Idaho
7. Wisconsin
8. Vermont
9. Hawaii
10. Minnesota

Interestingly, seven of the 10 states where it is easiest to get an SBA loan are served by only two regional offices. The regional office in Boston serves New Hampshire, Rhode Island, Massachusetts, and Vermont, while the regional office in Chicago serves Ohio, Wisconsin, and Minnesota.

Hardest States to Get an SBA Loan

Of the 50 states, South Carolina is the most difficult state in which to receive an SBA loan. Only 4.63% of eligible small businesses in the state received an SBA loan from 2010 through 2018. However, South Carolina wasn’t the only state that had less than 5% of its small businesses getting SBA funding, both Tennessee and the District of Columbia fell into this category as well.

The 10 worst states for SBA loans based on percent approved are:

1. South Carolina
2. Tennessee
3. District of Columbia
4. Alabama
5. Virginia
6. Louisiana
7. Florida
8. West Virginia
9. Arkansas
10. North Carolina

Similar to the regionality of the easiest states to get an SBA loan, all 10 of the states where it is hardest to receive an SBA loan are served by only three of the SBA regional offices. The regional office in Atlanta serves South Carolina, Tennessee, Alabama, Florida, and North Carolina. The King of Prussia regional office serves the District of Columbia, Virginia, and West Virginia. The regional office in Fort Worth serves the last two states, which are Louisiana and Arkansas.

Best States for SBA Loan Repayment

Between 2010 and 2018, 77.92% of SBA loans that were discharged in Montana were paid in full and on time. This is the highest percentage of any state in the country. However, North Dakota wasn’t far behind, with 77.79% of SBA loans being paid in full by small businesses in that state.

The 10 best states for SBA loans based on repayment rates are:

1. Montana
2. North Dakota
3. New Hampshire
4. Maine
5. Utah
6. South Dakota
7. Vermont
8. Minnesota
9. Nebraska
10. Kansas

Many of the states that made the list for best SBA loan repayment are also states with the lowest average SBA loan amount. Smaller loans are easier to repay, as the monthly payments are more manageable. States like New Hampshire, Vermont, and Maine have low average SBA loan amounts, resulting in higher repayment rates.

Worst States for SBA Loan Repayment

With nearly 40% of SBA loans issued in the state resulting in default, New Jersey is the worst state in terms of SBA loan repayment. The District of Columbia is a close second with slightly more than 39% of SBA loans ending in default.

The 10 worst states for SBA loans based on repayment rates are:

1. New Jersey
2. District of Columbia
3. Alabama
4. Nevada
5. Georgia
6. Delaware
7. Florida
8. South Carolina
9. Maryland
10. West Virginia

Georgia, South Carolina, and Alabama all have high default rates on SBA loans, but also have some of the highest average SBA loan amounts. While higher loan amounts are more difficult to qualify for, they are also more difficult to repay, which may be why these states have a higher percentage of SBA loans that result in charge off or cancelation by the SBA.

States With the Highest Average SBA Loan Amount

With an average SBA loan amount of $520,854, Georgia offers the largest SBA loans of any state in the country. South Carolina ranked second with an average loan amount of $430,650. Even Arizona, on the bottom of our top 10 list, had an average SBA loan amount of $338,018.

The 10 best states for SBA loans based on highest average SBA loan amount are:

1. Georgia
2. South Carolina
3. Arkansas
4. Tennessee
5. Alaska
6. California
7. North Carolina
8. Texas
9. Alabama
10. Arizona

Of the 10 states with the highest average loan amounts, three of these states are also on our list of states with the worst repayment rates. The top two states, Georgia and South Carolina, are two that also have lower than average repayment rates, with Alabama being the third state. This is unsurprising, as larger loans are more difficult to repay than smaller loans.

States With the Lowest Average SBA Loan Amount

Of all of the states, Hawaii has the smallest average SBA loan amount of $73,724, followed by Massachusetts with an average loan amount of $101,371. All of the states on this list have average loan amounts under $200,000. West Virginia, appearing as number 10 on the list has an average loan amount of $195,686.

The 10 worst states for SBA loans based on lowest average loan amount are:

1. Hawaii
2. Massachusetts
3. New Hampshire
4. Vermont
5. Maine
6. Rhode Island
7. North Dakota
8. Ohio
9. New York
10. West Virginia

With the exception of New York and West Virginia, all of the states that appear on the list for lowest average SBA loan amount are also states with high access to SBA loans, and/or high repayment rates. Smaller loans are easier to qualify for and easier to repay, so there’s a logical correlation between these findings. States offering smaller loan amounts can serve more businesses, and businesses receiving smaller loan amounts are less likely to default on their loan.

How to Increase Your Chances of Getting an SBA Loan in Any State

SBA loans are attractive to small business owners throughout the country for their low-interest rates and long repayment terms. There are steps you can take to increase your chances of getting an SBA loan, such as improving your personal and business credit scores, increasing your profitability, having collateral to back your loan, and paying off debt.

We encourage you to find out if the bank is an SBA preferred lender. Preferred lenders have a proven track record of helping small businesses get SBA loans and a streamlined application process. Another option is to work with a nonbank lender. Nonbank lenders often work with small business owners who have been rejected by banks.

No matter where you live or where your business is located, there are steps you can take to improve your chances of qualifying for an SBA loan:

• Improve your personal credit score: To qualify for an SBA loan, you generally need to have a personal credit score of 680 or higher. This is the single most important factor in getting approved. If you’re unsure of your credit score, you can check your score for free.
• Improve your business credit score: Every business has a credit score, and the higher your business credit score is, the more likely you are to qualify for an SBA loan. You should check your business credit score to verify its accuracy and to be aware of what potential lenders will see.
• Increase revenues and profitability: Lenders want to work with financially strong businesses. Before applying for an SBA loan, we encourage you to get your business in the best financial shape.
• Get enough collateral: The more collateral you can bring to the table, the higher chance you have of qualifying for an SBA loan. If your business doesn’t have much collateral, you can pledge personal assets such as your home or car.
• Pay off other debt: Lenders will check your business’s debt service coverage ratio (DSCR) before deciding whether to approve you for an SBA loan. DSCR measures your business’s capacity to repay debt. Your DSCR should generally be greater than 1.25x to qualify for an SBA loan.
• Wait it out: In general, SBA loans go to businesses that have been operating for at least two years. It’s more difficult to get an SBA loan for a business startup or buy an existing business. For startups or to buy an existing business, lenders typically expect you to have previous experience in the industry and a 20% down payment.

If your attempts to qualify for an SBA loan are unsuccessful, there are many alternatives to SBA loans for existing businesses and new businesses. If you are looking for working capital loans or startup business loans, there are a variety of financing options available, including unsecured business loans, rollover for business startups (ROBS), and personal loans for business.

Bottom Line

The state your business is located in can make a difference when it comes to how easy it is to get an SBA loan, the amount of funding you get, and the likelihood that it will be paid back on time. However, no matter where you live, there are actionable steps you can take to get on track to qualify for an SBA loan.